Demand

Question 1

Define demand:

Answer 1

The quantity of a good or service that consumers are willing and able to buy at any given price over a given time period

Question 2

What is a contraction in demand

Answer 2

Where price increases so quantity demanded decreases

Question 3

What is an extension in demand

Answer 3

Where price decreases so quantity demanded increases

Question 4

Define: PED

Answer 4

A measure of the responsiveness of quantity demanded of a good following a change in price

Question 5

PED equation

Answer 5

% change in QD / % change in P

Question 6

Percentage change calculation

Answer 6

% change = ((New - Original) / Original) x 100

Question 7

PED is always ___________

Answer 7

Negative

Question 8

If PED is greater than 1 then it is considered ____________

Answer 8

Elastic

Question 9

If PED is smaller than 1 then it is considered ____________

Answer 9

Inelastic

Question 10

What does elastic mean

Answer 10

Elastic means that consumers respond a lot to a change in price

Question 11

What does inelastic mean

Answer 11

Inelastic means that consumers respond less to a change in price

Question 12

PED of 1 =

Answer 12

Unitary Price Elasticity

Question 13

What does unitary price elasticity mean

Answer 13

That price and quantity change the same amount

Question 14

Elastic demand curve is ___________

Answer 14

Horizontal

Question 15

Inelastic demand curve is ___________

Answer 15

Verticle

Question 16

What is the shape of unitary price elasticity

Answer 16

Curved (Like the first half of a U)

Question 17

Factors which influence PED

Answer 17

NASBIT

1. Necessity
2. Addiction / habits
3. Substitutes
4. Brand loyalty
5. Proportion of Income
6. Time period

Question 18

Necessities are ____________ while luxuries are ____________

Answer 18

Necessities - Inelastic

Luxuries - Elastic

Question 19

Addictive goods are ___________

Answer 19

Inelastic

Question 20

Goods with many substitutes are ____________

Goods with few substitutes are ____________

Answer 20

Many substitutes - Elastic

Few substitutes - Inelastic

Question 21

Strong brand loyalty - ____________

Weak brand loyalty - _____________

Answer 21

Strong brand loyalty - Inelastic

Weak brand loyalty - Elastic

Question 22

High proportion of income - _____________

Low proportion of income - _____________

Answer 22

High proportion of income - Elastic

Low proportion of income - Inelastic

Question 23

Goods are ___________ in the short run

Answer 23

Short run - Inelastic

Question 24

Goods are __________ in the long run

Answer 24

Long run - Elastic

Question 25

Profit =

Answer 25

Total revenue = Total cost

Question 26

Total revenue =

Answer 26

Price x quantity

Question 27

How to increase revenue on an inelastic PED

Answer 27

Increase price

Question 28

How to increase revenue on an elastic PED

Answer 28

Decrease price

Question 29

Income elasticity of demand equation

Answer 29

% change in qd / % change in income

Question 30

Inferior goods have a __________ YED

Answer 30

Negative

Question 31

What is a normal good

Answer 31

Goods for which demand increases when income increases

Question 32

What is an inferior good

Answer 32

Goods for which demand falls when income increases

Question 33

XED equation

Answer 33

% change in quantity demanded / % change in price

Question 34

Substitutes have a __________ XED

Answer 34

Substitutes - positive

Question 35

Complements have a ____________ XED

Answer 35

Negative

Question 36

The higher the number of the XED, the ________ the 2 goods

Answer 36

Closer

Question 37

XED formula

Answer 37

% change in qd of good X / % change in price of good Y